The U.S. Securities and Exchange Commission (SEC) is set to increase oversight of audit firms working on audits of crypto-currency companies. The SEC is concerned that investors are being falsely reassured by audit reports, risking exposure to crypto-currencies.
The decision comes as several crypto-currency exchanges have proposed publishing proof of reserves to reassure customers about the safety of their funds and the financial health of the company.
SEC takes a closer look at crypto-currency audit reports
The SEC continues to hold its anti-crypto stance by increasing oversight of banking and financial firms that work with crypto companies. Now, the SEC is taking a closer look at how crypto-currency companies report from auditing firms.
Banks and audit firms are reluctant to work with crypto-currency companies due to pressure from regulators. Due to the increased scrutiny of audit firms, French firm Mazars has already suspended its services for crypto-currency exchanges, including Binance, Crypto.com and other crypto-currency exchanges. The auditing firm has even removed Binance’s proof of reserves report from its platform.
“We warn investors to be very wary of some of the statements made by crypto-currency companies“, Paul Munter, the SEC’s acting chief accountant, told The Wall Street Journal on Dec. 22.
In response to the agency’s fraud charges against former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang, SEC Chairman Gary Gensler said investors are exposed to the risks associated with crypto-currencies until crypto-currency companies comply with the time-tested securities laws. The SEC’s priority is to use all available tools to bring the crypto industry into compliance.
SEC sends warnings to audit firms working on crypto audits. The regulator believes that crypto exchanges are using the audit firms’ proof-of-reservation reports for their own benefit. Moreover, these reports contain only limited financial details to assess whether the company has enough assets to cover its liabilities.
Binance Responds to FUD
In response to the increased FUD, Binance clarified to the crypto community on Thursday that the crypto exchange has been fully transparent about their work and security.
Binance says Mazars stopped working with all crypto companies because the crypto community did not consider the audit report valid. The Big Four accounting firms did not cooperate with private crypto companies, but had audited publicly traded crypto companies.